BRICS is stirring turbulence for the US dollar reserves from every direction since the White House imposed sanctions on Russia in 2022. For two years, this coalition has been amassing gold and diversifying its central bank reserves with the precious metal. Over the past 18 months, central banks in developing nations have collectively procured 800 tonnes of gold. Intriguingly, China alone has acquired a substantial 225 tonnes of gold in the last 15 months.
Moreover, Russia, China, and India are amongst the foremost purchasers of gold, significantly driving up its prices. According to the World Gold Council, “On a year-to-date basis, central banks have bought an astonishing net 800 tonnes, 14% higher than the same period last year.” This behaviour is resulting in a decline in US dollar reserves, as BRICS swaps it out with gold in their central banks.
BRICS: US dollar-denominated central bank reserves fall to 58.2%
Source: Forbes / iStock
The latest figures reveal that US dollar-denominated foreign exchange central bank reserves have plummeted to 58.2% in 2024. This is the lowest level seen since 1995, as BRICS and other burgeoning economies fortify their central bank reserves with gold and various local currencies. Now isn’t that quite something?
Read more about gold price trends
Source: IMF
Moreover, the inclusion of other non-traditional reserve currencies in the central banks of BRICS nations and other developing countries is noteworthy. Central banks are trimming their US dollar holdings, substituting it with gold as a means to diversify their reserves. The IMF has noted that the primary alternative to the US dollar and the Euro is emerging in the form of “non-traditional reserve currencies.”
- Central Banks’ Gold Purchases
- Developing countries’ central banks: 800 tonnes in 18 months
- China: 225 tonnes in 15 months
- Diversification of Reserves
- Addition of gold and local currencies
- Decline in US dollar holdings
If indeed gold solidifies its position as a reserve in the central banks of BRICS countries, the US dollar may encounter significant deficits. The sharp decline in reserves suggests that moving away from the dollar could exacerbate its weakness. Emerging economies might soon play a pivotal role in steering the global financial system, leaving the US and its Western counterparts somewhat marginalised.
You may find it interesting to note that 40 countries are considering dropping the US dollar.
The shift towards gold is likely to alter the financial landscape significantly. It’s a compelling indication that we might be standing on the precipice of a new economic order.
